employee stock ownership plans

Employee Stock Ownership Plans – A Different Kind of Retirement

Retirement benefits, in today’s workforce, hold a similar spot in employees’ minds as coffee or a steady paycheck; they’re a necessity. Without retirement benefits, your organization will likely experience difficulty recruiting and retaining employees.

As Forbes put it, not paying for a retirement plan is not the financial plus it may seem. While you will save on the retirement benefits, your company will likely:

  • Experience higher health care costs
  • Have to pay above-average wages for comparable positions
  • Lose talent for other organization’s with retirement benefits

So, if you accept that your business needs retirement benefits, where do you go next? It starts with deciding which benefits you will offer your staff. For most organizations, the answer is a 401(k). Still, there are other options available.

One retirement benefit that has declined yet remains relatively popular is an employee stock ownership plan. But what exactly are employee stock ownership plans? Why have they declined in frequency? We’ll define ESOPs and explain exactly how these plans can help your organization.


What is an ESOP?

An employee stock ownership plan (ESOP), according to the National Center for Employee Ownership (NCEO), is defined as “when a company sets up a trust fund, into which it contributes new shares of its own stock or cash to buy existing shares.”

stock graph

ESOPs are most commonly used for a business owner who doesn’t want to sell to their competitor when they’re retiring. So, they sell it instead to their employees and get some cash out of the deal themselves.

Stock ownership plans, according to Benefits Pro, are used in approximately 9,000 U.S. companies, employing more than 15 million workers. All told the value of these businesses total more than $1.3 trillion.

Over the past decade, participation and assets in ESOPs have increased, but total participation has declined. What’s the explanation behind this conflicting trend? The simple answer is price. It’s both cheaper and easier to set up a company 401(k) as opposed to an employee stock ownership plan. Setting up an ESOP typically costs hundreds of thousands of dollars.

Also, the rules of employee stock ownership plans are complicated. Compared to a straightforward 401(k) plan, ESOPs are more difficult for your employees to understand and appreciate. This confusion can lead to some employees or recruits not valuing ESOPs as much as a more prevalent retirement plan.


Read more about ESOPs and other retirement plans.


How are ESOPs Changing?

A recent settlement between the Department of Labor (DOL) and First Bankers Trust has changed the game for ESOPs. Specifically, the rules have changed for company owners using an ESOP as a vehicle for selling to family members or their management team.


Employee stock ownership plans must now follow the new regulations, produced from this settlement. These new rules include:

  • Trustees that establish ESOPs must demonstrate proper consideration was given to the ESOP as a buyer of a company and/or that it has effective control
  • This demonstration can include establishing a board that includes an independent director, or, receiving a discount on the purchase price

Basically, if an owner wants to sell their shares in an ESOP, they need to have an “outsider” on their board. Or they must demonstrate the purchase price was negotiated, in good faith, to determine the fair market value of the stock price.


How Can an ESOP Boost Your Business?

The biggest draw of employee stock ownership plans is that they promote company and employee alignment. Essentially, ESOPs incentivize employees through participation in company ownership.

employees working

For business owners, an ESOP is also an important vehicle in succession planning. These plans are tools to ensure organizational culture and current employees would survive and ownership transition. Additionally, ESOPs help business owners avoid or defer capital-gain taxes.

Still, there is more than just anecdotal evidence to suggest that ESOPs can help an organization succeed. Per EBA, employee-owned companies grow about 2.5 percent per year faster than non-employee-owned companies. Similarly, these companies have 1/3 to 1/5 as many layoffs.

But it is not just the business or the business owner, that can benefit from employee stock ownership plans. Employees too, stand to gain from an ESOP. According to Benefits Pro, employee-owners:

  • Are more likely to rise toward the middle class
  • Have 92 percent greater median household net worth than nonemployee-owners
  • Take home 33 percent higher income from wages


The Wrap

Employee stock ownership plans, while expensive, can prove valuable for both employers and employees. While an ESOP may not be a necessity, like that slightly-burnt pot of office-coffee, it can offer your business tangible benefits.


11 Retirement Planning Questions You Need to Answer

Retirement planning is scary. The amount of apprehension and stress retirement can cause, is exponential. According to BlackRock CEO Larry Fink, this fear is the greatest problem in our country.

People fear retirement because it represents one of the largest unknowns in life. With this in mind, your company can rely on a few strategies to remove this unknown.

Arguably the best strategy is to educate your employees. Retirement education is vital for proper financial wellness and retirement planning.

The more an individual understands about their retirement, the less they have to question. And the less you have to question, the less you have to be scared.

These 11 questions will help you prepare for retirement, and all the twists and turns it can throw your way.

1. What kind of lifestyle do I want?

One of the first questions needed to determine how much money you will need; is what kind of lifestyle you want to lead. You may choose to cut back, or you might increase your spending.


Either way, it’s important to set an expectation for how you are going to live out your retirement. If you plan on being more active, to fill up all of your free time, it will be vital that you save enough to meet your needs.

Many people, for example, have multiple travel destinations on their bucket list. If you are planning on doing a lot of long-distance travel, it will cost you.


2. Do I want my life to be structured or spontaneous?

One of the biggest possible benefits of retirement, for many people, is not a set schedule every day. Still, for many individuals, the more structured life is, the less money they tend to spend.

Think about what structure in your life you have now. A budget is a terrific example of a certain amount of structure. Having a budget is also an example of how structure in your life helps you save money.

Without an accurate budget, you are likely to spend more money than you should. So, even if you want to live more spontaneously in retirement, a little structure can still help.

3. What will my retirement expenses be?

Similar to the first two questions, this third question is aimed at predicting what you will spend once retired. Most people can expect to spend around 85 cents in retirement for every $1 they spent before.


Still, multiple factors that can tip this scale in either direction. Healthcare costs and changes in lifestyle are examples of these factors.

For example, if your health worsens after retirement you could end up spending much more than you’re accustomed to spending.

Of course, it is impossible to calculate exactly how much money you will need. Nevertheless, it is important to at least attempt to predict how these factors will affect you.


4. How much debt do I have?

No matter where you are in life, if you are planning for retirement, you must know how much total debt you have accumulated or will have accumulated when you retire.

The more debt you have, the more retirement income you will need. Likewise, as you are deciding when to retire, you’ll need to figure out when you will be able to pay off your existing debts.

credit card-money

When paying off your debts, there are a few simple rules to keep in mind. The first is that you should settle your high-interest, non-tax-deductible debts first. This type of debt, such as credit card balances, is the worst kind of debt to have.

The second rule is to refinance any high-interest, tax-deductible debts you have, like a mortgage. Refinancing helps you get the lowest interest rate possible.


5. Do I want to move?

If you want to move after retirement, it is important to account for how a move will impact your cost of living. If you move to downsize but choose an area with a higher cost of real estate, your overall cost of living is likely to increase.

Most people stay in their current home into their retirement. So, it’s important to weigh the costs of staying in place. These costs include more than just your mortgage or rent expense.

For example, a common desire for retirees is to spend more time with their children/grandchildren. If you currently live a long distance away from your family, it could be expensive to visit them regularly.

In this scenario, moving closer to your family would represent another cost saving. The closer you are to the people you want to see often, the less money you have to spend on travel expenses.


6. What about my healthcare?

Your healthcare is a vital, yet often overlooked, component to retirement. As we age, we tend to use greater and greater amounts of healthcare.

It’s important for you to attempt to estimate the future cost of your healthcare, and where you will get your coverage. A crucial part of the whole retirement “thing” is that you get to stop working.

If you aren’t working, you likely won’t have an employer to provide you with an easy option for health insurance.

affordable health insurance

According to a 2015 Kaiser Foundation survey, only 23 percent of large firms that offered health benefits, also offered retiree health benefits. After you turn 65, you can always enroll in Medicaid. But Medicaid is not free.

The price of Medicaid, or other types of insurance if you retire before 65, is a significant factor to consider. In total, a couple who are both 65 and retired in 2016, will need an estimated $260,000 to cover their health care costs, according to Fidelity.

This number is a good place to start when planning your retirement. Factors such as gender, marital status, health history, and health risks will all contribute to whether you should increase or decrease this number for your planning.


7. What will my taxes be?

Brace yourself for impact. Taxes do NOT go away once you retire. As long as there’s breathe in your lungs, Uncle Sam will come knocking in April. Your tax bill can eat up a significant portion of your retirement income.


Up to 85 percent of your Social Security check may be taxable if you have other sources of revenue. Similarly, withdrawals from traditional IRAs and 401(k)s are taxed as ordinary income.

Make sure you are accounting for these taxes when you begin to withdraw money from your retirement accounts. For example, if you need $4,000 to cover your expenses, you may need to actually withdrawal $5,000 to cover your taxes.


8. How long will I live?

Nobody likes to talk about their imminent demise, but it’s a major component of your retirement. Now, unless your crystal ball skills are honed, it’s impossible to perfectly predict how long you will live.

But there are still multiple methods to generate a relatively accurate estimation. The easiest is to use the average life expectancy of your given Country/State/City. According to the CDC, the average life expectancy in the U.S is 78.8 years.

old couple

Another method is to use a life expectancy calculator. There are many of these calculators on the internet. The Social Security Administration, for example, has a plain version, but there are much more advanced calculators available.

Just remember, when calculating your life expectancy, and how much money you will need, you won’t have a money problem if you live less.  So, when planning your retirement, it’s usually better to air on the side of caution, and longevity.


9. What are my sources of retirement income?

Knowing what your retirement income will be, is just as important to know as your expenses. Between 401(k)s, annuities, pensions, IRAs, real estate, and business ventures there are a plethora of possible income streams for you to track.

For those with little saved in their designated retirement account, these options can represent hope. While it’s important to save as much as you can, other options like real estate or a business can serve as a path to a comfortable retirement.


10. How much will I get from Social Security?

Another income stream, not mentioned above, is social security. While social security is the primary source of income for a majority of Americans, it shouldn’t be.

Remember: social security was never intended to be your primary source of retirement income. Still, your social security checks can be a nice way to supplement your income. The maximum benefit you can receive in 2017 is $2,687 a month.

But a majority of people do not receive this maximum. The overall average monthly benefit is only $1, 342 a month. As you can see, there is a large range of possibilities. Again, there are several online calculators at your disposal.


11. How long will I work?

The final question you need to ask yourself is how long you are planning on working. Keep in mind that half of the U.S. workforce retires before they expect to. And of those individuals, 60 percent leave work due to health or durability issues.

measuring tape

You may have a planned retirement age but it may not be feasible for you to get to that goal once you near it. Setting a more conservative retirement date for yourself, gives you more of a cushion in case you have to retire earlier than you’d prefer.


The Wrap

No matter when, where, or how you choose to retire, make sure you have all the necessary information. As you engage in retirement planning, use these 11 questions to check yourself before you (financially) wreck yourself.

retirement myths

10 Retirement Myths to Avoid for Better Financial Wellness

Talking about retirement is tough. Because you’re talking about someone’s life savings, their future, it makes any conversation more difficult. One mistake could be potentially devastating.

And yet that doesn’t stop everyone from handing out retirement advice like it’s Werther’s hard candy. This situation has resulted in a saturation of underwhelming, poor, and even dangerous beliefs about retirement.

So it is important when you’re planning your retirement to know what information you should follow, and what you can ignore. These ten retirement myths you should avoid to improve your current and future financial wellness.


1. You only Contribute Up to The Match

Any contributions to your 401(k) account are a great place to start for your retirement planning. Still, if you are only contributing the amount that gets you the maximum match from your employer, you may not be saving enough.

money stacks

Most employers will match between three and six percent of your pre-tax income. So, if you save four percent and your company matches, you are only saving a total of eight percent.

A majority of experts recommend that, if you want to maintain your pre-retirement lifestyle, you should save AT LEAST 10 percent of every paycheck. So obviously if you’re saving eight percent of your income, you’re going to come up well short of 15 percent.

The more you save, the less you will have to worry about money during your retirement. That’s why saving only up to the percentage your employer matches, could be a mistake.


2. You Don’t Need a Budget

This myth is actually two parts. The first piece of misinformation is that you won’t need a budget while saving for retirement. If you’re forty years from retirement, chances are creating a budget to prepare for retirement isn’t your first worry.


Still, it is important for everyone, even the youngsters, to create and follow a budget as soon as possible. And you should continue to follow this budget even into retirement.

Many people believe that retiring means you are free from following a budget. A survey conducted by Fidelity Investments found that more than 10 percent of Baby Boomers believed that they could withdraw 10 to 12 percent of their income, annually.

Most advisors recommend that each retiree should withdraw no more than 3-5 percent of their savings per year. Spending over 10 percent of your budget every year could leave you open to financial troubles in the future.


3. You’ll be Able to Choose When You Retire

If you have your retirement all planned out, that’s great! But keep in mind how unlikely it is that you will get to choose specifically when, where, and why you retire. Life gets in the way of even the best-laid plans.


If you are saving less than you should be, in the belief that you will retire much later, or get a part-time job post retirement, you may be in trouble. Injury, illness, or family matters may force you into retirement earlier than you wished.

According to a 2015 survey by the Employee Benefit Research Institute, half of U.S. workers retire before they expect to. Also, of those, 60 percent leave the workforce early due to health or disability issues.

Similarly, it may not be as easy to get a part-time job after retirement, as you would believe. Employers, especially for a part-time job, are likely going to prefer younger candidates who are more flexible and cheaper.


4. You’ll be Able to Rely on Social Security for Replacement Income

Let’s all say this next line together. SOCIAL SECURITY WAS NEVER INTENDED TO REPLACE YOUR INCOME. Over the course of the past 82 years, social security has almost entirely transformed.

social security

It has turned from a security blanket meant to reassure citizens in the wake of the Great Depression, into what many people bank on as their main source of income in retirement.

The most you will get out of Social Security is around 40 percent of your pre-retirement income. For those who earned more over their career, this percentage will be even lower.


5. You Assume Your Taxes Will Be Lower

Many people believe that when they retire, they will be making less money and will, therefore, save on taxes. But this assumption isn’t always a safe one to make.

As you age, it is likely that you will have fewer federal deductions and dependents you can claim. This could result in a greater percentage of your income being taken by taxes.


6. You Move Your Investments as You Age

A lot of people will invest more aggressively the younger they are. Then as they grow older, they begin to invest more in bonds, CDs, and other safer investment options. Now, less risk is a good thing, but it usually means a lower rate of return.


Even if you wait until retirement, to switch your investment strategy, it could backfire. As life expectancies grow, the average person will need more savings. If you invest too conservatively, it can be almost as dangerous as investing too aggressively.

A switch to a strict, conservative, investment plan may result in you running out of money faster than you otherwise would have.


7. You Don’t Have to Invest Aggressively if You Start Early

As per The Motley Fool, the main draw of tax-deferred retirement accounts like IRAs and 401(k)s is the ability to grow your money without having to pay taxes on any of your investment gains.

These tax incentives allow you to reinvest your gains, and get more advantage of the compounding effect. Still, you may not be making full use of this advantage if you are investing too conservatively.

stock market

A 2016 Wells Fargo study found that 60 percent of workers aren’t investing aggressively enough. The study said that savers in the 30s, 40s, and 50s are so focused on minimizing losses that they’re not capitalizing on growth opportunities.

In other words, too many people aren’t investing in stocks because they’re one of the most volatile investments in the market. But switching from a bond-focused to a stock-focused investment strategy could double your final savings.

If you invest conservatively from the beginning, you could be losing out on hundreds of thousands of dollars over the course of your career.


8. You Believe There’s a Specific Number You Need to Meet

Many people think that there is some magic number you need to reach before you can retire. What many books and experts fail to recognize is that every person’s situation is different.

Every person will need to save a different amount and is are a multitude of variables that determine the amount. Two individuals who are the same age will likely need to save different amounts.

For example, you can be the same age as your friend but, gender, socioeconomic status, and where you live will result in the two of you needing different amounts for retirement.


9. You Only Use One Savings Tool

One, often overlooked error is exclusively saving through your 401(k) plan. While 401(k)s are excellent, retirement saving vehicles they are not the only kind. Using a different savings tool, such as an IRA, to supplement what you are already saving in your 401(k) can provide several benefits.

The first benefit is that you get a more diverse set of investment options. Employer-sponsored retirement plans usually have a pre-set, limited amount of investing options. IRAs and other investment vehicles often offer a wider array of investment options.

Additionally, these accounts can provide different tax incentives that your employer-sponsored plan cannot. Money put into a Roth IRA, for example, is taxed right away, but then grows tax-free growth, and can be withdrawn at any time, tax-free.

None of this is to suggest you shouldn’t save through your employer’s plan. Rather, diversify your accounts as you would the investments themselves.


10. You Think There’s Always Time to Catch Up

One of the biggest mistakes any person can make is believing that they will always have a chance to make up savings. If they don’t save in their twenties and thirties, they will just make up for it in their 40s and 50s.


DO NOT FALL FOR THIS LINE OF THINKING. The biggest advantage you have in your early 20s is not one that can ever be replicated: time. Through compounding, you can grow your money at a rate that would otherwise be impossible.

According to Jon Ullin, managing principal of Wealth Management in Florida, if you save $6,500 each year, and it grows at 6 percent, you will make your first million in 40 years. The longer you wait to invest, the less effect compounding has on your savings.


The Wrap

The road to retirement is fret with risk, myths, and copious amounts of misinformation. Know these 10 retirement myths to avoid any pitfalls on your financial journey and secure long-term financial wellness.


Solo Saving: Exploring The Compelling Benefits of IRAs

What’s scarier than the uncertainty of your future? The uncertainty of your money in the future. It may be this fear that drives people to neglect their retirement plan, or even ignore it altogether.

According to a report by the Economic Policy Institute, 1 in 3 Americans has $0 (!!) saved for retirement. Similarly, the median savings for all families in the U.S. is only $5,000.

Knowing these statistics, you can see it is highly likely your employees are not saving enough. But how do you get them to save more? The first action you can take is to set up a company retirement plan, such as a 401(k). Still, these plans are not the end-all-be-all.

The median amount in a 401(k) savings account is $18,433, according to the Employee Benefits Research Institute. While this is markedly improved from the $5,000 overall median, it is still nowhere near enough.

Here’s where IRAs come into the picture. Individual retirement accounts (IRAs) can help bridge the gap that many employees face between their desired retirement income, and what they are currently saving (or rather not saving).


What is an IRA?

An IRA is a tax-sheltered retirement account set up at a bank, investment firm, or insurance company. These accounts can be made up of mutual funds, stocks, bonds, bank deposits, and other types of investments.

It is important to note that an IRA is not an investment itself. Rather, it is a basket in which you keep these stocks, bonds, and other assets. Your employees also need to be aware that there are eligibility restrictions to every IRA based on your income and employment status.

Depending on the type of IRA the individual chooses, there are different tax advantages to these accounts. It is important that your employees understand the differences in the various types of IRAs, to make the best decision for themselves.


Types of IRAs

There are 11 total different types of IRAs. For the purpose of this article, we will stick to the main three. Those three are traditional, Roth, and rollover accounts.


1. Traditional IRAs

Traditional IRAs are the most common form of IRA. Contributions to traditional IRAs can be made on a pre-tax basis. These contributions reduce your gross income, which reduces your overall tax burden (meaning you will owe less in taxes at the end of the year).

Both your contributions and any earnings for your account grow tax-deferred until the funds are withdrawn. For this year, 2017, an individual can contribute up to $5,500 between all of your IRAs. If you’re age 50 or older, you can contribute an extra $1,000, for up to $6,500.

You can withdraw funds from a traditional IRA, penalty-free, at age 591/2. In fact, you must begin to withdraw money from your account by the age of 701/2. Otherwise mandatory minimum amounts will be withdrawn throughout the year.

Conversely, you will be subject to a 10 percent penalty if you make a withdrawal before age 591/2. Traditional IRAs can be converted to Roth IRAs, but you must pay income taxes on all funds. Although, you do not have to pay any tax penalties for doing so.


2. Roth IRAs

Roth IRAs, like traditional ones, offer employees a particular set of tax incentives. Though, the tax incentives are mostly different than traditional accounts. The first advantage is that all earnings and the principal are tax-free.

This advantage; however, is also a Roth IRA’s biggest disadvantage. Annual contributions are not tax deductible, which means that you pay income tax on any contributions to your Roth account.

Still, because of this tax, all earnings and your principal are 100 percent tax-free. Unlike traditional accounts, principal contributions to Roth IRAs can be withdrawn at any time, without any penalty, as long as the required 5-year holding period is met.

Another difference in a Roth IRA is that you must make under a certain amount of money, to make contributions. These income limits, per the IRS, are:


If your filing status is… And your modified AGI is… Then you can contribute…
married filing jointly or qualifying widow(er)

 < $186,000

 up to the limit

 > $186,000 but < $196,000

 a reduced amount

 > $196,000


married filing separately and you lived with your spouse at any time during the year

 < $10,000

 a reduced amount

 > $10,000


singlehead of household, or married filing separately and you did not live with your spouse at any time during the year

 < $118,000

 up to the limit

 > $118,000 but < $133,000

 a reduced amount

 > $133,000



3. Rollover Accounts

A rollover IRA is a traditional IRA set up to receive a distribution(s) from a qualified retirement plan. The big advantage of a rollover IRA is that it is not subject to any contribution limits.

This lack of contribution limits allows any employee to distribute money from a previous employer’s retirement plan, into their own individual account. Additionally, these distributions may be eligible for subsequent transfer into a new employer’s qualified retirement plan, at a later date.

It is worth noting that you can roll multiple qualified retirement plans into one IRA. If you have retirement accounts at three different past employers, you can roll all of them into one single account through your IRA provider.


Benefits of IRAs?

There are multiple benefits to having an IRA, even if you already contribute to your workplace retirement account. The first reason to have an IRA is that it allows you to diversify your investments.

There are many more investment options when choosing your IRA investments, as opposed to a company-sponsored retirement plan. Similarly, IRAs, because they are your own, give you more control. Through an IRA you can choose when, where, and how you invest your money.

These benefit can improve your employees’ savings. Improved savings lead to better financial wellness. Better financial wellness can boost employee engagement and productivity.

This financial wellness is important because financial stress is both very real and very powerful. According to a survey from the International Foundation of Employee Benefit Plans, financial stress has a real impact on employees.

The study found that those reporting high levels of stress were twice as likely to report poor overall health, increased absenteeism, and decreased productivity.


The Wrap

If your company offers a qualified retirement plan it’s a great idea for your employees to contribute to their account; especially if there is any sort of employer match. Still, these plans don’t have to be your workers’ only investment accounts.

Individual retirement accounts are a terrific method for employees to diversify and gain more control over their investments. In turn, your company gets a staff that is less likely to fall victim to the negative effects of financial stress.

So when it comes to saving for retirement; get an IRA before you get IRAte.

fiduciary rule

The DOL’s Fiduciary Rule: A Comprehensive Timeline

After years of gestation, and several delays, the Department of Labor’s fiduciary rule is finally set to be implemented.

In a surprise move, Secretary of Labor Alexander Acosta has refused any further delay of the rule. It is important to note that this decision means that the rule will only go into partial full effect on June ninth. Full implementation won’t occur until January 1, 2018.


What is the rule?

The DOL fiduciary rule states that all retirement-financial advisors are required to operate as a fiduciary. A fiduciary is required to put their client’s needs before their own.

Those operating as a fiduciary must avoid conflicts of interest and operate with full transparency, including all plan costs and fees. Advisors must now have their clients sign a “best interest contract,” which requires any conflict of interest to be disclosed.

According to a statement by the DOL, “These fiduciary standards require advisors to adhere to a best interest standard when making investment recommendations, charge no more than reasonable compensation for their services and refrain from making misleading statements.”

Under current rules advisors, insurance salespeople, and broker-dealers may act under the suitability standard if they choose. The suitability standard requires these individuals to ensure an investment is suitable for a client at the time of investment.

Advisors who do not operate as a fiduciary are allowed to use incentives such as quotas, bonuses, or prizes. These incentives could potentially encourage recommendations that are not in the client’s best interest.

To be clear, this rule does not affect regular brokerage accounts; rather it applies to retirement accounts and the advisors who handle them.


Fiduciary Rule Timeline

The rule was proposed on April 14, 2015. From there it was fast-tracked by President Obama and was officially finalized by the DOL almost a year later, on April 6, 2016.

Since it was announced, the rule has been under intense scrutiny from a large section of the financial industry. Opponents claim the rule is an example of regulatory overreach. Still, as of now, the rule has been upheld in three separate court cases.

Most recently, Texas federal trial Judge Barbara M.G. Lynn ruled in favor of the Labor Department in a case where the plaintiffs included the U.S. Chamber of Commerce, and the Securities Industry and Financial Markets Association.

On February 3, 2017, Trump issued an executive order that instructed the Department of Labor to examine, and undertake an assessment of the rule, and if it deems appropriate, a proposal to revise the rulemaking.

Then, on March 1, the DOL submitted a 60-day extension of the rule’s implementation. The DOL, as urged by President Trump, used this delay to review the regulation.

And, while the review is still ongoing, many insiders expected the review to end in a rule change or a further delay.

But Secretary Acosta, in an article in the Wall Street Journal, said that until this point, the department has, “found no principled legal basis to change the June 9 date,” while they continue to seek public input.

It is worth noting that while the fiduciary rule will finally go into partial effect, the rule itself is still subject to change. The DOL could still write changes into the regulation. Still, as of now the rule is set to go into full effect January 1, 2018.

Sign up for our newsletter to get the latest updates on any further changes to the fiduciary rule.

financial stress

5 Benefits That Will Ease Your Employees’ Financial Stress

The almighty dollar. Money makes the world go ‘round, but it can also make your head spin ‘round. For a vast majority of us, a primary cause of stress is our finances.

According to PwC’s 2016 Employee Financial Wellness Survey, employees are at the highest level of stress, due to finances, in five years. A Harris Poll conducted for Purchasing Power found that 80 percent of employees are under financial stress.

This stress has a negative impact on both employees and their employers. Stress costs businesses an average of $300 billion a year due to stress-related healthcare and missed work.

workplace stress

Similarly, financial stress also causes employees to lose sleep. According to a study by Financial Finesse, 6 out of 10 employees lose sleep over their financial situations. As a result, the average employer suffers a loss of 11.3 days of productivity per year, per employee.

Helping your employees manage their financial stress is critical to a healthy and successful business. These are the top five benefits that will ease your employees’ financial stress.


1. Financial Literacy Education

One of the first, easiest, and best things your company can do to lessen your employees’ financial stress is to educate them on financial literacy.

The President’s Advisory Council on Financial Literacy defines financial literacy as “the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being.”

Financial literacy aids employees by giving them the knowledge and ability to reach self-sufficiency in their daily financial lives. If your employees are financially illiterate, according to Investopedia, they can fall victim to predatory lending, subprime mortgages, fraud, and high-interest rates.

All of these results of financial illiteracy can lead to poor finances and large amounts of financial stress. Your financial literacy education plan should teach employees the basics of personal finance that apply to their everyday lives.


2. Financial Counseling

The next benefit you can provide your employees to decrease their financial stress is credit counseling. Credit counseling allows employees to discuss their debt and credit with a trained financial professional.

This counseling can be hugely beneficial to your employees as national debt continues to rise. Credit card debt is especially prevalent in the U.S. As of December 2016, the average U.S. credit card debt reached $16,061, according to NerdWallet.

workplace stress

Additionally, in a study by the Alliant Credit Union, 37 percent of respondents named paying off credit card debt as one of their top financial goals. Your staff wants to eliminate their debt, and personalized financial counseling can help them do so.

Going through credit counseling gives your employees a personalized action plan, budget, repayment strategies, and targeted advice to help them deal with their credit and debt.

These tools allow your staff to understand their financial situation, and develop a plan to achieve their financial goals.


3. Retirement Savings

The most obvious, yet arguably the most important, benefit you can offer your employees is a retirement savings account. Retirement savings accounts come in two forms: defined contribution and defined benefits plan.

Defined contribution plans, such as a 401(k), give employees tax benefits while giving them an easy path to save for their retirement and their future. These accounts offer tax-based incentives that make it worthwhile for employees to save, and to save sooner rather than later.

Saving for retirement is an enormous issue for your staff today. According to Time, 1 in 3 Americans have $0 saved for retirement. On average, the median for all families in the U.S. is only $5,000, and the median for households with some savings is $60,000, according to CNBC.

Retirement savings are a serious source of stress for many Americans. A survey by Schwab Retirement Plan Services found that 40 percent of employees named saving enough money for a comfortable retirement as a significant source of stress.


4. College Savings Account

A college savings account, or 529 plan, is beneficial for anyone who plans on attending college or wants to support a relative or a friend who plans on attending college. College tuition is rising, and it is important to save, to prevent accruing massive amounts of debt.

These 529 plans give employees tax advantages for saving for college. Earnings are not subject to federal tax, and are not subject to state tax when used for qualified education expenses.

Qualified education expenses can include tuition, fees, books, room and board, computer technology, and related services such as Internet access.

Students in the U.S. have racked up a collective $1.3 trillion in student loan debt. College savings accounts help your employees to avoid the stress of exorbitant school loans.


5. Student Loan Repayment

Similar to 529 plans, student loan repayment assistance helps your staff to ease the stress of accumulated student loans. The average graduate will leave college with $37,172 of student loan debt.

Student loan repayment is a voluntary benefit, offered by an employer, that pays back a portion of an employee’s student loan debt on a monthly or annual basis.

Typically, a company agrees to pay a specific amount each month, or in a lump sum after a certain amount of time. This money can be applied directly to the principal, which also helps to lower the amount of interest each month that an individual has to pay from that point on.

The American Psychological Association has reported that every year, since 2007, Americans have named money as their top source of stress every year. These five benefits can help your employees avoid the negative impact of financial stress.



financial wellness

Healthy Money – How to Improve Employees’ Financial Wellness

There is no annual physical, no routine checkups, no emergency room. There’s no set schedule or resources for individuals to monitor and maintain their financial well-being.

Because of this ambiguity, the onus lies on each to be responsible for their financial wellness. With a multitude of other factors to worry about in life, financial wellness is often an afterthought.

According to a study by LIMRA, only 28 percent of respondents said they are very confident about their ability to make important financial decisions.

Not only are employees not confident in their ability, but they are also not confident in their actual finances. A 2016 study by Bank of America found that 75 percent of employees gave indications that they are not financially secure.

Financial wellness is a facet of employees lives that employers should consider when making benefits decisions. An individual’s financial wellness can have a direct impact on their professional success, which can subsequently affect their organization’s success.


What is financial wellness?

Financial wellness, as defined by Financial Finesse, is a state of well-being where an individual has achieved minimal financial stress, established a strong financial foundation, and created an ongoing plan to help reach future financial goals.

Financial wellness is important to your company because it has a direct impact on your employees. When an employee has poor financial wellness, other areas of their life suffer too.

Over half of employees say that they are stressed about their finances, according to a survey by PwC. Additionally, 45 percent say their worries have worsened over the past 12 months.

healthy employee habits

This stress can wreak havoc on an individual’s personal and professional life. And often the lines between these two worlds will begin to blur. Stress costs employers an average of $300 billion a year in stress-related health care and missed work.


How to improve financial wellness?

As an employer, there are a few steps you can take to nudge your employees along the path towards financial wellness. Here are five possible solutions.


1. Defined Contribution/Benefits Plan

One of the first and best methods of ensuring financial wellness is creating a defined contribution or benefits plan. Defined contribution plans, like a 401(k) allow employees tax benefits to save for their retirement.

Saving for retirement is important as it eases the burden that workers face when contemplating their future retirement. These plans offer tax-based incentives that make it worthwhile for employees to save, and to save sooner rather than later.

Some employers who offer a defined contribution plan may struggle with getting their employees to participate in the program. A way to boost participation in these plans is to have your employees opt out rather than opt in.

Opting out means that, upon their hire, an employee is automatically enrolled in the contribution plan. This automatic enrollment means that employees have to opt out of the contribution plan or they will stay enrolled in it as long as they’re employed.


2. Healthcare Savings Education

Unsurprisingly, offering health insurance to your employees helps them to avoid debt that stems from the cost of health care. Still, health insurance does not solve all medical-related financial problems.

Last year, one in five working-age Americans with insurance experienced problems paying medical bills. Additionally, during the past year, 31 percent of Americans took money out of retirement, college, or other long-term savings accounts to pay medical bills.


These statistics elaborate the need that employees have for medical cost planning and education. Even with insurance, today’s medical landscape has pushed individuals to be smarter health care consumers.

Understanding the differences in plan types, providers, HSA, and FSAs is of the utmost importance. Educating your employees on these differences can help your employees from withdrawing money from other accounts, or going into debt.


3. Tailored Financial Education

Automated and online options are easy, quick, and relatively inexpensive, but they do not provide the same level of service and relevance that a customized financial education plan does.

When training is customized to meet an individual’s needs is when it becomes especially useful. Employees do not want to listen to information that is irrelevant to their particular situation.

This tool is also valuable because it is a differentiator that very few other companies have. According to BenefitsPro, only 35 percent of employers offer this kind of specialized educational training.


4. Debt Management Tools

Unfortunately, one of the constants in today’s society is debt. There are; however, a good kind of debt (such as a home mortgage) and a bad kind (such as a credit card). Your employees whether they are willing to admit it or not, need help to manage their debt.

According to a study by the Alliant Credit Union, 37 percent of respondents said that paying off credit card debt is one of their top financial goals. Additionally, 22 percent stated that their top goal was just staying afloat with debt obligations.

Credit card debt especially prevalent in the U.S. As of December 2016, the average U.S. credit card debt reached $16,061, according to NerdWallet. Employees need to learn to minimize this kind of negative debt.

A program to help employees manage their debt would aid employees in reducing and properly managing this kind of bad debt. This management, in turn, would contribute to reducing the stress and distraction caused by looming debt.


5. College Savings/ Student Loan Debt Repayment

College debt is another large form of debt in this country. While student loans (unlike credit cards) are a form of good debt, the sheer amount the average person accumulates is staggering and can be a real burden.

The average 2016 graduate will leave college with $37,172 of debt, which is up 6 percent from last year. As a whole, Americans owe almost $1.3 trillion in student loan debt.

College savings accounts and student loan debt repayment are two tools your company can offer that will help your employees manage this source of debt. Both of these tools help to alleviate the pressure that accompanies paying for college.


The Wrap

Every year since 2007, according to the American Psychological Association started its “Stress in America” report, Americans have named money as their top source of stress every year.

It is clear that money is a primary source of negative stress. This stress has a direct, negative, impact on employee productivity, satisfaction, and engagement.

According to a 2014 survey by PwC, around one out of four employees say that their finances have been a distraction at work. To free your staff from this potential burden, you need to support their financial wellness.

Not only is financial wellness the “right thing” to do, but it is also financially significant. SHRM estimates that employers can save up to $3 for every dollar spent on financial wellness programs.

Clearly, the best decision both on a personal and business level is financial wellness. So when faced with the choice don’t throw financial wellness down the well.

Top 10 Trends in Retirement Planning for Millennials

Millennials are known for their inclination to live in the moment. This cultural outlook has shown us that with each new generation, people will marry, buy homes and have children later in life.

Millennial retirement planning is far different than previous generations and unfortunately, the YOLO motto that has influenced these youngsters doesn’t really set them up for the future. 

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student loan repayment

5 Stats to Scare Your Millennials into Retirement Planning

Millennials, you’ve read about them, they may even inhabit a good part of your workforce. Millennials are bright eyed and bushy tailed, and for the most part uninformed about their retirement options.

Sure they know a lot about evolving technology and social platform etiquette, but what do they really know about benefits, retirement plans and fixed incomes?

What do they know about preparing for the future? We have put together a list of 5 stats to scare your Millennials into caring about retirement planning. 

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Cut Out Confusion with Better Retirement Plan Communication

Millennials are so far from retirement the last thing they are thinking about is learning how their 401(k) works. And Baby Boomers are so close to retiring it’s hard for them to visualize the plan they agreed to 20 years ago without panic. One surefire way to remove the tension?

Better communication. You’re able to cut out confusion with better retirement plan communication. It may be difficult for some employees to understand why they qualify for some benefits and not others, but when you take the time to thoroughly explain each facet of their retirement plan, they’ll thank you.

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